Directors representing some of Australia’s largest companies say there are genuine problems with the industrial relations system, but business leaders are reluctant to complain because of the polarised nature of debate on the subject.

Melinda Cilento, a director of Woodside Petroleum and Wesfarmers General Insurance, said the simplistic debate was frustrating because there were complicated and important issues to be considered.

“As soon as you say anything you’re immediately in the camp of ‘for the Fair Work Act or for WorkChoices . . . we are unable to have a frank conversation about what we think is working and what is not working," she told an Australian Institute of Company Directors hosted event.

Ms Cilento said the recent review of the act noted that none of the stakeholders had in fact sought a return to WorkChoices. Instead, there were “legitimate" concerns about the system that needed to be looked at such as the construction costs on major projects. “You are starting to see issues in the [resources] sector where . . . incredible wage rises are being demanded, in some circumstances 30 per cent, and they are not being matched with productivity gains," she said. “That’s just unsustainable; that’s not politics, that’s the reality of it."

OZ Minerals director Rebecca McGrath
Photo: Arsineh Houspian

If unchecked that would lead to projects being scrapped, she said.

Ms Cilento said, for example, that the open-ended nature of protected industrial action could cause huge challenges for big projects.

“There is a view that it is easier to engage in protected action now than it was [before the Fair Work Act], it is very difficult to end, there is a concern about the extent to which the Act actually deters unprotected action," she said. “When you have a $15 billion project in play and you are trying to meet deadlines those issues are fundamental. Yet it seems we can’t have those discussions without saying ‘no, you want to go back to WorkChoices’."

Ms Cilento said it was a similarly curtailed debated about individual contracts.

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Rebecca McGrath, a director of OZ Minerals, Incitec Pivot, CSR and Goodman Group, agreed the debate was polarised but the risks from not solving the issues were great. “If we don’t get a hold of the productivity issues and the cost of doing business issues and if the people talking about resources sector cooling are right then we have a very big cliff we can fall off around being internationally competitive," she said.

Ms McGrath said she did not support a return to WorkChoices but there was more to the debate than that.

“Do I think we should bring back the previous regime? No. Do I think some of the extremely militant and absent of productivity and prosperity for Australia discussions or actions should be happening? No. But there’s a lot of space between those two but unfortunately, like a lot of political issues, it’s totally polarised," she said.

Tonianne Dwyer, director of DEXUS Funds Management and Cardno, recently returned from working in Britain and said the impression for offshore investors was there were high levels of risk in Australia, particularly around industrial relations.

“The industrial relations arena is a minefield for people," she said. “They come in and the way we conduct our industrial relations is quite unique, there are aspects of it that are common, but it is quite unique."

Ms Dwyer said the reason executives did not raise issues such as industrial relations but also broader policy issues such as tax reform or carbon pricing in public forums was partly because it was the role of peak bodies to have those conversations with policy makers on both sides of politics.

“It’s actually getting down to the detail and the meat of it, throwing out a line at an annual results presentation . . . it doesn’t get reported and it doesn’t make a difference," she said.

“I hear from a lot of people how difficult it is for business to engage in a constructive discussion with government whether that’s the government in power or the next government. The Liberal and National parties just aren’t engaging with business at the moment to discuss their policies . . . so how do you influence."

Geelong Football Club board member Diana Taylor said there was a sense that industrial negotiations were conducted with a compliance mentality rather than seeking productivity gains. “There is often a claim put forward for a percentage increase of salary but my question is always what are you getting for that money.

“In terms of the legislation itself, we are not seeing anything which encourages technological infrastructure development, things which encourage innovation," she said. “Those things obviously are coming from businesses themselves who want to move on and grow but they are not actually being driven by the legislation.

“So I would question whether there is an opportunity for the legislation itself and for the policy-makers to be thinking about the way in which they wish to move Australia in terms of its workforce, its infrastructure and its flexibility to ensure that the legislation is actually properly reflecting the aims and objectives and the future for our workforce because I don’t believe it is actually doing that at the moment, I believe it is very much focused on those Fair Work Act requirements."

Ms Cilento said the debate about productivity needed to be broader than just industrial relations.

“I think this country needs to have a really honest debate about where productivity is going. Industrial relations is one part of it, there’s a whole range of issues that need to be addressed, but industrial relations, as soon as you mention it becomes the only thing that people want to talk about," she said.

“It’s a really complicated area, it’s really complex, the legislation is complex. Because of that people want to simplify it, they want to simplify what you’re saying and there is a reluctance to be painted in that way when you know there are complex issues that underpin it.

Ms Cilento said she believed most people saw WorkChoices “as an era now where the safety net was not sufficient enough".

That meant that anyone arguing for changes to the current system was faced with accusations about their motives.

“Straight away if you’re put in that camp, you’re someone who is for business rights over employee rights you don’t care about a safety net you just want to have it your own way," he said.

“I don’t think that’s what people are saying. I think people recognise that WorkChoices went too far I don’t think people want to revisit that but I think people are saying that there are aspects of what we have had in the past that did work that had benefits and there is some specific things that business raised in the ...review around greenfield agreements for example."

Ms Cilento said individual contracts should be part of the debate.

“Individual contracts, every time you mention it again it goes to that whole issue, you’re for destroying wages and conditions well I think individual contracts have a place in the system if you look at the FWA review panel’s own comments when they summarised what the intention of the FWA was, their paraphrasing of the government was they had concerns that individual agreements led to a reduction in the terms and conditions for “some workers", some workers, yet now we can’t talk about them having a place in the overall system.

“Where if you actually believe the arrangements around enterprise agreements are working I don’t personally understand why putting them on the table is seen as such a threat to the system.